Two factors often determine stock prices in the long run: earnings and interest rates. Investors can't control the latter, but they can focus on a company's earnings results every quarter.

The earnings figure itself is key, of course, but a beat or miss on the bottom line can sometimes be just as, if not more, important. Therefore, investors should consider paying close attention to these earnings surprises, as a big beat can help a stock climb and vice versa.

Now that we know how important earnings and earnings surprises are, it's time to show investors how to take advantage of these events to boost their returns by utilizing the Zacks Earnings ESP filter.

The Zacks Earnings ESP, Explained

The Zacks Earnings ESP, or Expected Surprise Prediction, aims to find earnings surprises by focusing on the most recent analyst revisions. The basic premise is that if an analyst reevaluates their earnings estimate ahead of an earnings release, it means they likely have new information that could possibly be more accurate.

Now that we understand the basic idea, let's look at how the Expected Surprise Prediction works. The ESP is calculated by comparing the Most Accurate Estimate to the Zacks Consensus Estimate, with the percentage difference between the two giving us the Zacks ESP figure.

Bringing together a positive earnings ESP alongside a Zacks Rank #3 (Hold) or better has helped stocks report a positive earnings surprise 70% of the time. Furthermore, by using these parameters, investors have seen 28.3% annual returns on average, according to our 10 year backtest.

Most stocks, about 60%, fall into the #3 (Hold) category, and they are expected to perform in-line with the broader market. Stocks with a #2 (Buy) and #1 (Strong Buy) rating, or the top 15% and top 5% of stocks, respectively, should outperform the market, with Strong Buy stocks outperforming more than any other rank.

Should You Consider Verizon Communications?

The last thing we will do today, now that we have a grasp on the ESP and how powerful of a tool it can be, is to quickly look at a qualifying stock. Verizon Communications (VZ Quick QuoteVZ - Free Report) holds a #3 (Hold) at the moment and its Most Accurate Estimate comes in at $1.19 a share 10 days away from its upcoming earnings release on July 21, 2025.

By taking the percentage difference between the $1.19 Most Accurate Estimate and the $1.18 Zacks Consensus Estimate, Verizon Communications has an Earnings ESP of +0.18%. Investors should also know that VZ is one of a large group of stocks with positive ESPs. Make sure to utilize our Earnings ESP Filter to uncover the best stocks to buy or sell before they've reported.

VZ is just one of a large group of Computer and Technology stocks with a positive ESP figure. ServiceNow (NOW Quick QuoteNOW - Free Report) is another qualifying stock you may want to consider.

ServiceNow is a Zacks Rank #2 (Buy) stock, and is getting ready to report earnings on July 23, 2025. NOW's Most Accurate Estimate sits at $3.61 a share 12 days from its next earnings release.

ServiceNow's Earnings ESP figure currently stands at +2.11% after taking the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $3.54.

VZ and NOW's positive ESP figures tell us that both stocks have a good chance at beating analyst expectations in their next earnings report.

Find Stocks to Buy or Sell Before They're Reported

Use the Zacks Earnings ESP Filter to turn up stocks with the highest probability of positively, or negatively, surprising to buy or sell before they're reported for profitable earnings season trading. Check it out here >>